Cheap Homes still aren’t Cheap Enough for Millennials

The sustained gains in U.S. hiring should be cause for optimism amongst millennials looking to purchase a home, but the reality is grimmer than many would have hoped. The increased demand for “starter homes” is creating a shortage, and pushing prices beyond the grasp of would be homeowners.


The least expensive homes—“properties at 75 percent or less of the median—were up 10.7 percent in August from a year earlier and now represent the only one of four price tiers to surpass the peak reached during the housing bubble, according to a housing index from CoreLogic Inc. The August pace was 5.9 percent above its pre-recession high in October 2006.”

This gap emerging in the growth rate between the most expensive and the cheapest homes is now at its widest point since 1983, “with the latter rising at a pace that is 5.2 percentage points higher than that of the top tier.” Sam Khater is CoreLogic’s deputy chief economist and he explained, “You’ve got the front end of a big wave of first-time homebuyers but the supply of affordable housing is not there to meet that wave. What you’re seeing in the housing market is a reflection of the polarization of income. The builders are looking at it from that perspective: ‘If I have a choice of going up- and down-market, I’ve got to go up-market.”

The pressure on prices is worsening. Zillow reports that the, “bottom third of the market accounted for 24.4 percent of listings in August. That’s down from 25.6 percent a year earlier. In Denver, where the shortage is extreme, the lowest tier accounted for just 16 percent of inventory.”

If you’re a first-time homebuyer looking to make the leap from rent to mortgage, then preparing for changes in the market and creating a financial plan can help mitigate the frustration and maximize your opportunities. Start your house hunt with the right foot forward by creating a financial plan today. Speaking to an expert at Apex Financial Advisors can help you set and reach your goals, and be one step closer to move in day.

Source:
http://www.bloomberg.com/news/articles/2015-10-20/prices-for-starter-homes-are-crowding-out-millennials